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Mortgage Refinance

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There’s no better time for a mortgage refinance than the present because mortgage rates have largely been unaffected by the current economic crisis. Refinancing the mortgage loan you have on your home can improve your monthly cash flow, leaving you with more in your pocket and less in the way of expenses.

 

Some Of The Reasons To Consider A Mortgage Refinance Now Are:

 

1. To Improve Your Mortgage Rate

If mortgage rates have dropped since you took out your loan, then refinancing can be a cost-effective solution. You can save a considerable amount of money if you refinance your mortgage at the current rates. Similarly, if your credit rating has improved, you may be eligible for a
lower mortgage rate.



2. To Make Your Monthly Payments More Predictable and Easier To Plan For

Borrowers who took out an adjustable-rate mortgage (ARM) can refinance to a more predictable fixed-rate mortgage loan. It’s one way to ensure that your monthly payments stay the same instead of fluctuating with the rise and fall of mortgage rates.



3. To Lower Your Monthly Payments

If you successfully apply for a mortgage refinance loan with a lower interest, your monthly payments go down too. Another way to leverage refinancing as a means of lowering your monthly payments is by extending your payoff date. The outstanding loan amount can be re-assessed and divided into lower monthly principles.



4. To Shorten Your Repayment Period

If you initially took out a 30-year home loan, it is possible to refinance to a shorter loan term, say 15 years. Switching to a 15-year-fixed-rate mortgage loan not only shortens your term, but it also makes your monthly payments more predictable. 15-year mortgages typically don’t attract high-interest rates, so it’s possible that there won’t be a huge increase in your monthly mortgage payments.



5. To Get Some Cash

Cash-out refinancing involves borrowing against your home equity. You might need cash to finance a new business, another home,
or for any purpose, and refinancing your mortgage can be a cost-effective way to get some. 
There are a few other reasons why people decide to refinance their mortgage loans. Some refinance to combine two mortgages, eliminate a party on the mortgage contract (as is usually the case after a divorce), or to cancel mortgage insurance. In any case, you will need to be fully prepared to give your refinance application a higher chance of success.



Preparing for a Mortgage Refinance – 3 Things You Must Do

The key to getting your refinance application approved lies in the preparation. You have to make yourself as appealing to
lenders as possible. One way to do so is by putting together a comprehensive application package.



Here is a checklist to guide you through the mortgage refinance process:

Step 1: gather all your documents.

Step 2: update your financial information (employment details, credit card bills, income tax statement, property tax bills, etc.)

Step 3: get an accurate estimate of the value of your home.



Gather All Your Documents

A lot of paperwork is involved when refinancing your mortgage, but most of it is similar to what you used to apply for your original mortgage. Tracking down your documents ahead of time is a surefire way to expedite the application process. You will need:

· Proof of income – This includes a few pay stubs from your most recent paychecks, copies of your tax return documents from the last two years, receipts or canceled checks from alimony payments, and proof of any other source of income.

· Proof of assets – You’ll need to submit recent statements from your bank and investment accounts as proof of assets owned. Like your tax returns, lenders will probe as far back as two years into your bank statements. It is prudent to avoid making any large deposits or withdrawals in the period leading up to your application. Should any unusual activity be detected, you must provide a reasonable explanation to the lender.



Update Your Financial Information

Lenders want to know whether your income will be enough to cover your monthly payments after refinancing your mortgage. Now’s the time to update your financial information to include new expenses, new credit cards, new auto loans, or new CRA paymentsIf you took your original mortgage loan a decade ago, then you need to update your current financial profile to accurately reflect your current income and expenses, which gives lenders a clearer picture. Updating your financial info may also improve your financial flexibility by boosting your monthly cash flow.


Get an Accurate Estimate of the Value of Your Home

You may need to re-evaluate your home before refinancing your current mortgage loan. An accurate estimate of your home’s value will assist the lender in determining the loan amount you’re eligible for. Knowing your home’s actual value is crucial during this process. An appraisal ensures that you don’t get a loan that doesn’t account for your home’s actual value, making it possible to refinance without digging into your equity.



Bottom Line

 Let’s recap:

·  Refinancing your mortgage loan is one way to improve your financial health.

·  It can lower your monthly payments, your mortgage rate, or your loan term.

·  You can refinance a mortgage to obtain cash, combine two mortgages, get a fixed mortgage rate, or shorten the repayment period.

·  If you took an adjustable-rate mortgage originally, you could refinance to switch to a more predictable (fixed) mortgage rate.

·  The most important thing to do before applying for refinancing is to prepare your application package.

·  An application package that’s prepared ahead of time will raise your chances of getting the mortgage refinancing.



It is of utmost importance to show up with all the necessary documents. The better prepared you are, the easier it is for lenders to evaluate your application and ascertain whether you qualify. And while there’s nothing wrong with leaving the heavy lifting to a financial professional, it is important to familiarize yourself with the requirements and process of refinancing a mortgage.

 

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